Futures Point To A Stronger Open
INTEREST RATES
01/05 OVERNIGHT CHANGE to 04:05 AM:BONDS+0 The
Treasury market comes into the week back on its heels, after a major technical
washout and a surprise flurry of favorable economic information late last week.
The ISM manufacturing readings were simply a shocking development, which
resulted in many economists and traders thinking that the jobless recovery was
showing signs of being corrected. Expectations for the weekly non-farm payroll
report due Friday, call for a 75,000 to 175,000 gain, which is certainly a vast
improvement over the November report, that came out in the first week of
December.
STOCK INDICES
01/05 OVRNIGHT CHG to 04:05 AM:S&P+160, DOW27,
NIKKEI +111, FTSE-5 While many might suggest that the market is over extended,
one can hardly argue against the steady flow of favorable economic information
seen over the last two sessions. For instance, it would seem that the economic
information released last week, has now actually convinced the Treasury market
that the jobless recovery issue is going away. With the Nikkei leading the way
to higher action overnight and the market apparently ready to propagate the
bullish optimism, we think that stocks will attempt to buy the rumor on the jobs
front at least in the early part of the week.
DOW
The bias is up today but the March Dow must regain the spike high last week of
10,479 to avoid talk of a top. Critical support in the March Dow comes in at
10,415 and then again down at 10,398. While the gains since the November low are
quite expansive, the last COT report does not suggest that the Dow is completely
bought out! More gains, but we would not like to see an intraday trade below
10,400.
S&P
Like the Dow, the S&P needs to make a statement early with a rise above the
Friday high of 1118.00. Also like the Dow, we do not expect the COT report (to
be released after the close today) to show the small spec long in the S&P at an
extreme overbought level. Therefore, the technicals and the fundamentals seem to
project more near term gains ahead. A critical failure would take place with a
dip back below 1104.70.
FOREIGN EXCHANGE
US DOLLAR
Another big range down move, puts the Dollar right
back into the downward motion seen for most of last week. In fact, it would seem
that official comments are justifying the downside in the Dollar and down
playing the ramifications of a lower Dollar. In short, the world seems to be
giving its tacit blessing to a lower Dollar and that should allow the sellers
even more capacity to attack the short side. We would have thought that the
strengthening US economy would make some sellers stand away but that doesn’t
appear to be the case. Those that sold a June Dollar and bought three June $ 92
calls, should hold the futures until all the call premium is regained! Near term
down side targeting in the March Dollar Index comes in at 84.02 and then again
down at 83.80.
EURO
Overnight Euro zone Industry output rose a greater
than expected amount and that partially justifies the rise in the Euro or at
least reduces the chance that some ECB official will surprise the market, with a
complaint about the pace of the Dollar decline. We suspect that the Euro will
have some catch up action ahead after last week’s choppy trade. Near term upside
targeting in the Euro is pegged at 127.27. The trend is up and fundamental
developments don’t seem to be capable of altering the course of trade!
YEN
As we suspected the BOJ was only going to be able to
restrain the market for a period of time and overnight the pressure from the
falling Dollar became too much. While we suspect that the BOJ will attempt to
slow the gains, the market is on its way to a new higher trading range. In fact,
until the Yen gets back up into the late 2000 consolidation around 96.00 to
97.50 traders might be capable of running prices aggressively higher.
SWISS
Like the Euro, the Swiss recently saw some choppy
action and that probably served to level the overbought technicals slightly.
Therefore, we doubt that the technicals will be able to undermine the bull camp.
Near term upside targeting comes in at 82.10.
BRITISH POUND
The breakout up in the Pound leaves the market
headed to the 1990 to 1992 trading range bound by 181 to 190. Unless there is
some central bank concern lodged on the Dollar debacle, the trend looks to
remain squarely to the upside. Near term support in the Pound comes off the
monthly chart down at 178.43.
CANADIAN DOLLAR
The Canadian is poised for more gains mostly because
the Dollar is simply without support. Near term support in the Canadian comes in
at 77.32 and 77.10 on the weekly chart. The trend is up but we are a little
hesitant to pay up without regard to risk and reward.
METALS
OVERNIGHT
GLD+2.40, SLV+6.00, PLAT+12.70 London
A.M. Gold fix $417.75 +$.50 LME COPPER STOCKS 430,025 tons -470 tons COMEX Gold
stocks 3.12 ml +70,450 oz Comex Silver stocks 124.2 ml oz +1.65 ml oz
GOLD
With the gold market ending 2003 at a new contract
high and the Dollar seemingly continuing downward following the gold close early
last week, it would seem that the bull camp maintains a slight edge. In fact,
the Dollar starts the week out with a gap down trade and that should serve to
escalate the long interest in gold. It was certainly clear from the action last
week that higher equity prices were not going to deter buyers from gold, as the
gold buying trend seems to be finding a steady flow of buyers.
SILVER
In the 4th quarter, silver prices managed to rise
roughly $1.25 an ounce and that is quite significant when one considers the
partially deflationary conditions present in the quarter. COMEX silver stocks
saw 1.65 million ounces of silver come back into the warehouse late last week
but the supply has been fairly constant over the last two weeks. The gold market
should continue to provide some positive direction for silver, which at times
seems to be tracking its own fundamentals.
PLATINUM
After some discouraging weakness last week, the
platinum market appears to have righted the ship with an overnight breakout up.
Therefore, the threat of a major top is passing and it would appear that April
platinum prices are headed back to the recent contract highs of $840.
COPPER
If the opening price action is any indication, the
copper market is going to open 2004 in a red hot fashion. While some of the
overnight gains are the result of the market playing catch up, it is clear that
Asian players are concerned about tight supplies and still willing to pay up to
secure future needs. Even with the SARS issue showing up in China over the
weekend, it would seem that buyers are acutely aware of the improving global
economic outlook and are afraid of shortages.
CRUDE COMPLEX
01/05 OVERNIGHT CHG to 04:05 AM:CRUDE+43,
HEAT+244, UNGAS+71 During the extended closure last week, the outlook for the
economy improved and the weather in the US turned just a little colder. It
should be noted that last weeks inventory reports showed US crude stocks falling
below the level of 270 ml barrels, which the EIA considers to be critical. With
the US crude stocks at the API registering 267 million barrels, one has to give
a distinct edge to the bull camp.
NATURAL GAS
While the favorable economic improvement in the US
outlook should help to support natural gas prices, it is clear that the natural
gas market is a little unsure on its near term direction, as prices have shown
significant strength and weakness in the last two weeks. We also have to think
that the last weekly inventory report was disappointing, with only an 80 bcf
draw, which puts the annual surplus at slightly mitigating 202 bcf level.
However, the upcoming weather forecast is distinctly bullish, with a chance for
single digit temperatures for at least two days in the coming week.